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Dot com II reaches fever pitch

Alexandra Cain

Online outsourcing marketplace Freelancer.com’s founder Matt Barrie has a message for budding dot-com entrepreneurs: there’s never been a better time to start a business.

First, starting a business in 2011 is incredibly cheap. Thanks to open-source software (computer programming tools that are available free for anyone to use), Barrie says “there are so many free resources you can use to build an internet business, as well as free web servers and even the things you pay for like domain names and advertising are all really inexpensive”.

“And if you don’t know how to do something you can outsource extremely cheaply, really you can build a business on the back of a credit card,” he says.

Barrie says even securing more substantial funding to start a business is now also much easier thanks to the advent of “super angel” investors.

“In the old days you’d need an investment of $5 million to start a business, now you can get a site up and running for $20,000 which gives you a real chance of ‘bootstrapping’ a business,” he says.

According to Barrie, 2011 “feels like 1998 [the height of the first dot-com boom]. I was at Stanford then and although the tech market was really strong in 1997, it wasn’t until 1998 that people started saying ‘this time it’s different’. And it’s the same feeling now – there’s a boom happening right now”.

There sure is, if the recent listing of business networking site LinkedIn on the New York Stock Exchange is anything to go by. The company’s share price rose 84 per cent on its first day.

Freelancer.com was born almost by accident. On ‘'gardening leave'’, after finishing in late 2006 with the computer chip company he once ran, Barrie was searching for a side project and was exploring setting up an online web directory.

He says “I was looking to upload thousands of listings and was prepared to pay someone in Australia $2 per listing. When I couldn’t find someone in Australia I went searching online and came across a Swedish site called Getafreelancer.com”.

“It was a terrible site, every shade of grey, developed by Ukranian designers out of the Cold War. But I posted my job and when I came back to check on it there were 74 responses. People had bid $500, $400, $300 for the project and I eventually got it done perfectly for $100 by a team in Vietnam in three days. I thought ‘this can’t be real’ and I figured out it had the potential to completely disrupt the global labour market”.

Barrie started writing the software for an Australian version of the site, and simultaneously discovered two, similar US businesses had managed to raise tens of millions of dollars to develop their own site.

Realising it would be impossible to compete with the US sites by building a similar business from scratch, he approached Getafreelancer’s Swedish owners to buy the business and was given a first option on it.

Then he had to work out how to finance the deal. Having walked out on 10 venture capital companies in his previous business, Barrie was sceptical he could raise the required funds to finance his venture.

“It was very tough,” reflects Barrie. “The people I did see didn’t understand the business and the fact it was already making money.”

Then in came Simon Clausen, who had just sold a business to IT security firm Symantec and was looking for a project in which to invest. “I was already talking to him about being an independent director for the company and when I showed him what I wanted to do, he came up with the funding,” says Barrie.

Having bought the business, Barrie then set about fixing the business model. At the time, the business received a 10 per cent cut of every job that went through the site, or members could pay a $12 monthly flat fee for an unlimited number of jobs. The problem was that this fee was often rebated. “We were basically offering a free service,” laughs Barrie.

So one of his first decisions was to change the fee structure to a 3 per cent commission model. He says “within months cash flow went through the roof.” At the same time, Barrie bought up 12 competitor sites around the world.

The business has had a phenomenal rise since then and now has 85 staff globally, 2,600,000 users from 234 countries, 930,000 posted projects to date and there has been $90,000,000 spent through site.

But despite the business’s meteoric rise, Barrie says, he’s not preparing Freelancer.com for a listing.

“We’re still at the organic growth stage. Although there’s a fire hose of traffic to our site, there are still hundreds of things we’re working on to make Freelancer.com the next eBay.”

Nevertheless, if they are not doing so already, it’s almost certain it won’t be long before venture capital firms are beating a path to his door.

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